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By: Kendall Jones on February 19th, 2021

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Construction Bidding Tips: Finding & Selecting the Right Projects

Operating Insights

Winning more construction bids isn’t a direct result of simply bidding more projects. Bidding on every project that comes your ways isn’t a smart or sustainable bidding strategy.

Successful contractors know where they operate best and identify the right type of projects for their business to win more bid, improve profitability, and grow their business. Winning more bids, or more precisely winning more profitable bids, requires an investment in time and resources.

Before investing the time and resource, you need to evaluate your current bidding process and make an honest assessment of what you’re doing right and what needs to be changed in order to be more competitive.

Work Acquisition – Winning a Project

The process of construction contracting begins with work acquisition. In order to build a job, a contractor must first win the job. Winning more bids begins long before bid or proposal submission.

To win more bids, you must understand that construction contracting requires dedicated study, field experience, and business knowledge. Winning on a consistent basis requires knowledge–knowledge of the client and their expectations, knowledge of the details and scope of work of the project, and knowledge of local building codes and other regulations and requirements.

The goal is to win over the prospective client by showing them the value you bring that meets or exceeds their needs and expectations. This could include quality, timeliness, cost, or a combination of all three.

For most public construction projects, this means being the lowest responsible bidder. For private construction projects, the owner may put a higher value on your quality of work or performance on past projects. By understanding exactly what the client wants means you can craft a more competitive bid or proposal.

Selecting the Right Work – Market Analysis

In order to select the right work, you need to review past projects and determine what type of work was most profitable. This may differ from the work you and your firm like to perform. This review should be objective and data-driven, so check your intuition and gut feelings at the door before you begin.

In order to analyze their market, conduct a review of past projects and performance, including everything you’ve bid on over the past year to determine the type of projects that you have the bid-win ration on and which ones were most profitable. Items to include in you analysis include:

  • Project Name
  • Year Completed
  • Type of Work
  • Name Client
  • Project Location
  • Contracting Method
  • Bid Amount
  • Original Contract Amount
  • Final Contract Amount
  • Final Cost Amount
  • Estimated Profit Margin
  • Actual Profit Margin

By getting a clear picture of your bid-win ration and most profitable projects based on type of work, location, client, etc., you’ll better understand how to easily identify which projects to pursue and improve your bottom line.

Another method to help you select the right projects is conducting a market analysis. Based on your company’s own data on projects over time, you can determine what makes the perfect market for your construction firm.

A perfect market is determined by clients, project types, and location but there’s no set standard for what makes a perfect market and it can differ greatly from contractor to contractor. What is standard among contractors is that the definition of “perfect” typically contains the fact that the client, type of work, and location are highly profitable.

Each of the factors of the market must be clearly defined by the members of your team conducting the analysis. For client type, it can simply be a listing of clients you’ve worked with over the past year or two and whether they are a public or private entity.

For location, you can go as broad or as granular as you like, and it may depend on the size service area of your company. If you’re licensed to perform work in multiple states, you may just focus on the state, county, or MSA. If your company tends to be more local, you may use city or zip code to define locations.

For type of work, again you can be as broad or specific based on what you think works best for your company. You define work type by the type of structure—apartment, hotels, retail, office buildings, schools, etc. You can dig a little deeper and sort those by type of construction, i.e., new construction, renovations, fit-outs, etc., size of project, and project value.

You then need to develop the criteria that that defines what is “perfect” in each market category. For the client rating, you may decide that perfect clients are those that pay on time, have predictable bid scopes, and demand quality work. For the location rating, the perfect locations might include those with the best pool of suppliers and subcontractors, cost of travel, or material costs.

Next, assign each of these a level of importance, on a scale of 1 to 10, to profitability. The most important criteria are assigned the highest weight. In order to ensure a complete and clear analysis, no two factors should have the same weight or rating. Be sure to dedicate adequate time and energy in determining the “perfect” market for your construction firm.

The analyses for each of the market factors need to be completed separately in order to develop a clear picture of each factor. Develop a score for each of the categories and then multiply that score by the weight of each criteria. The total will give you an overall score for each category.

The categories that score highest are considered the most ideal (perfect), while those that score the lowest are less than ideal. Using this method, you can determine the perfect clients to work with, the perfect locations, and the perfect types of work to find, bid, and win more profitable projects.

The end goal is to position your company to win more bids by becoming more selective in terms of the clients, locations, and types of work they bid upon.


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About Kendall Jones

Kendall Jones is the Editor in Chief at ConstructConnect. He has been writing about the construction industry for years, covering a wide range of topics from safety and technology to industry news and operating insights.

     
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